Patomak In The News

House lawmakers are drafting legislation to preempt some aspects of state licensing and regulation of the virtual currency industry in a bid to help U.S.-based crypto exchanges and blockchain companies remain competitive in a global market.

“There needs to be some partial federal preemption” of state laws, Rep. Darren Soto (D-Fla.) said during a four-hour Sept. 25 listening session between lawmakers and companies including Coinbase Inc., one of the largest virtual currency exchanges, and blockchain developer ConsenSys, among many others.

Rep. Warren Davidson (R-Ohio), whose office organized the roundtable event on Capitol Hill, plans to introduce legislation in the next few weeks incorporating the industry’s feedback, his spokesman told Bloomberg Law. The measure is unlikely to advance in the final days of this Congress but could be reintroduced next year.

The bill may include provisions to preempt certain aspects of state licensing and oversight requirements for entities such as virtual currency exchanges, Davidson told Bloomberg Law after the session. “You’ve got to have a preemption at some level for this,” he said.

If lawmakers consider creating a new asset class for virtual currencies and tokens, “it doesn’t do much if the federal government recognizes this new asset class but no state does,” Davidson said.

Any proposal to preempt state authorities is likely to face significant pushback from the states.

“We have 50 states here, and those states have many different people who have interests in securities markets,” Paul Atkins, a former commissioner at the Securities and Exchange Commission who now leads the financial services consulting group Patomak Global Partners LLC, said during a panel.

Skeptical members of Congress may also prove a hurdle. Tom Emmer (R-Minn.), who also appeared during the event, said more education is needed for other lawmakers still sorting out the difference between virtual currencies and the distributed ledger technologies that support them.

“We have too many members of Congress that don’t understand the area that you’re working in,” Emmer told the crowd.